Daily 5: Doubts emerge in financial world that Mario can cash out to the max if Burkle doesn’t sell his majority

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TIOPS DAILY FIVE

1. Mario Lemieux and Ron Burkle exploring options of selling the Penguins hasn’t been a question of ‘if’, it’s been a question of ‘when’ in recent months.

It became official Wednesday night that the Penguins are pushing forward in exploring their options after the team confirmed they have hired Morgan Stanley.

“We conduct periodic reviews of our business and, because we have received several inquiries about the franchise in recent years, we decided to engage Morgan Stanley for their insight and counsel,” Mario Lemieux and Ron Burkle said in a joint statement. “After buying the team out of bankruptcy, ensuring its long-term future in Pittsburgh and creating a strong foundation for continued success, we believe it is time to explore our options.”

“Our goal all along was to solidify the franchise both on and off the ice,” Lemieux said. “Our star players are signed to long-term contracts, they’ve got a deep and passionate base to support them, and I believe the Penguins are well-positioned for the future. Regardless of what happens, I plan on staying involved with the team in some capacity, and Ron and I plan to retain an ownership stake.”

2. What will end up being the end game remains to be seen but this much is known and clear at this point:

Mario Lemieux wants to cash out to the max level and still retain a 5-10% stake in the organization. Minority owners in the organization have been aware of Lemieux’s desire to give up his majority stake for around nine months now and were made aware in April that the Penguins would be going through and exploring options of a potential sale.

After the firing of Ray Shero last summer and the Penguins making wholesale changes, it was anticipated that ownership would become more involved in the day to day operations. It never happened as Lemieux is said to have been more distant than ever this past season.

Plain and simple, he’s ready to move on to other things.

3. The wildcard in all of this is Ron Burkle right now. Burkle loves owning an NHL team and I’m told the ideal scenario from Burkle’s end is that there’s enough incentive (financially) for Mario to sell his majority stake and Burkle can keep his majority stake.

However, some investors I’ve spoken with today believe that for Mario to truly cash out to the max, Burkle is also going to have to sell his majority stake. Owning an NHL team isn’t a cash cow and the Penguins are not raking in money.

Can the Penguins find a prospective owner to buy Mario’s majority stake with Burkle staying on as majority owner? That’s the million dollar question right now.

Some in the financial world have their doubts.

Burkle is said to be open to all options and the whole situation right now is about Mario cashing out to the max. If for that to happen the best scenario is both selling their majority stakes, then it will happen.

4. Forbes values the Penguins at $565 million. The Tribune-Review reported last night that the Penguins feel Forbes value placed on the franchise is low.

The key thing in all of this is the real estate surrounding the arena that the Penguins control. It has a huge impact on the value of the franchise.

Burkle and Lemieux had a deal in place in 2006 to sell the team to Jim Balsillie for around $175 million. Nine years later, the franchise could go for around $450-$500 million, some experts are predicting, and likely over $550 million if the real estate the Penguins control comes into play.

5. What will be the end game?

The chance to own a team with Sidney Crosby on it, I believe there’s going to be a wealthy businessman who’s a crazy die hard hockey fan worth hundreds of millions that will step forward to make it worth while for both Burkle, Lemieux to sell their majority stakes.